Who Sealed Krymsoda’s Fate?

As reported Interfax Ukraine, Head of the World Bank Office in Kyiv Gregory Jedrzejczak said that his institution views transferring the management of the state interest of 50% plus one share in the Krymsky Sodovy Zavod (Crimean Soda Plant) Open Joint Stock Company to Ukrsotsbank as a breach of the terms of cooperation between the World Bank and Ukraine regarding the Enterprise Development Adjustment Loan (EDAL-2).

Ukraine’s National Agency for State Corporate Rights Management did not hand over the management of Krymsky Sodovy Zavod to Ukrsotsbank control, said agency First Deputy Director Olena Koval. She also stressed that the agency has not signed any papers with Ukrsotsbank. “We did not sign the management agreement, nor did we develop or have anything do to with it.” According to Koval, the agency continues to prepare new auctions to transfer the management of state shares, conducts audits, and assesses state corporate rights. Simultaneously, the deputy director said, on the instructions of the Ukrainian President, the agency is not holding any new auctions, and earlier formed bid evaluation committees will not make any decisions before a law on management is adopted and enacted.

World Band Private Business Development Project Coordinator Andriy Mikhniov, explaining the EDAL-2 terms to The Day, said, “This project was launched in September 1998 as an adjustment loan to support the state budget. Its main terms and conditions included privatization, deregulation, and reform of the capital market and accounting system. The project provided for three $100 million loan installments. On June 30, 1999 the World Bank issued Ukraine the third and last $100 tranche under EDAL-2 project, within which Ukraine undertook to sell controlling interests in ten lucrative enterprises, including the Krymsky Sodovy Zavod, at auctions with the participation of advisors.

Andriy Mikhniov severely criticized further developments centering on the joint stock company. Intending to hold an open bidding for the plant, the World Bank enlisted the consulting services of the Investment Bank. Incidentally, it cost Ukraine nothing because the funds were provided by TACIS. “The transfer of the management of the plant to Ukrsotsbank is a very strong negative sign for investors. You could hardly think of anything worse. It will be difficult for Ukraine to restore the foreign investors’ confidence it has lost,” said Mikhniov.

Ukrsotsbank neither verified nor denied the involvement of the agency with the plant transfer. “We will not comment on the agency’s statement. There is a corresponding decision of the Cabinet of Ministers to which we will adhere.”